The world is abuzz with talk of automation. Rapid advances in artificial intelligence, machine learning and robotics seem set to transform the world of work. In the most advanced factories, companies like Tesla have been aiming for ‘lights-out’ production, in which fully automated work processes, no longer needing human hands, can run in the dark. Meanwhile, in the illuminated halls of robotics conventions, machines are on display that can play ping-pong, cook food, have sex and even hold conversations. Computers are not only developing new strategies for playing Go, but are said to be writing symphonies that bring audiences to tears. Dressed in white lab coats or donning virtual suits, computers are learning to identify cancers and will soon be developing legal strategies. Trucks are already barrelling across the us without drivers; robotic dogs are carrying military-grade weapons across desolate plains. Are we living in the last days of human toil? Is what Edward Bellamy once called the ‘edict of Eden’ about to be revoked, as ‘men’—or at least, the wealthiest among them—become like gods?footnote¹

There are many reasons to doubt the hype. For one thing, machines remain comically incapable of opening doors or, alas, folding laundry. Robotic security guards are toppling into mall fountains. Computerized digital assistants can answer questions and translate documents, but not well enough to do the job without human intervention; the same is true of self-driving cars.footnote² In the midst of the American ‘Fight for Fifteen’ movement, billboards went up in San Francisco threatening to replace fast-food workers with touchscreens if a law raising the minimum wage were passed. The Wall Street Journal dubbed the bill the ‘robot employment act’. Yet many fast-food workers in Europe already work alongside touchscreens and often earn better pay than in the us.footnote³ Is the talk of automation overdone?

i. the automation discourse

In the pages of newspapers and popular magazines, scare stories about automation may remain just idle chatter. However, over the past decade, this talk has crystalized into an influential social theory, which purports not only to analyse current technologies and predict their future, but also to explore the consequences of technological change for society at large. This automation discourse rests on four main propositions. First, workers are already being displaced by ever-more advanced machines, resulting in rising levels of ‘technological unemployment’. Second, this displacement is a sign that we are on the verge of achieving a largely automated society, in which nearly all work will be performed by self-moving machines and intelligent computers. Third: automation should entail humanity’s collective liberation from toil, but because we live in a society where most people must work in order to live, this dream may well turn out to be a nightmare.footnote⁴ Fourth, therefore, the only way to prevent a mass-unemployment catastrophe is to provide a universal basic income (ubi), breaking the connection between the incomes people earn and the work they do, as a way to inaugurate a new society.

This argument has been put forward by a number of self-described futurists. In the widely read Second Machine Age (2014), Erik Brynjolfsson and Andrew McAfee argue that we find ourselves ‘at an inflection point—a bend in the curve where many technologies that used to be found only in science fiction are becoming everyday reality.’ New technologies promise an enormous ‘bounty’, but Brynjolfsson and McAfee caution that ‘there is no economic law that says that all workers, or even a majority of workers, will benefit from these advances.’ On the contrary: as the demand for labour falls with the adoption of more advanced technologies, wages are stagnating; a rising share of annual income is therefore being captured by capital rather than by labour. The result is growing inequality, which could ‘slow our journey’ into what they call ‘the second machine age’ by generating a ‘failure mode of capitalism’ in which rentier extraction crowds out technological innovation.footnote⁵ In Rise of the Robots (2015), Martin Ford similarly claims that we are pushing ‘towards a tipping point’ that is poised to ‘make the entire economy less labour-intensive.’ Again, ‘the most frightening long-term scenario of all might be if the global economic system eventually manages to adapt to the new reality’, leading to the creation of an ‘automated feudalism’ in which the ‘peasants would be largely superfluous’ and the elite impervious to economic demands.footnote⁶ For these authors, education and retraining will not be enough to stabilize the demand for labour in an automated economy; some form of guaranteed non-wage income, such as a negative income tax, must be put in place.footnote⁷

The automation discourse has been enthusiastically adopted by the jeans-wearing elite of Silicon Valley. Bill Gates is advocating for a tax on robots. Mark Zuckerberg told Harvard undergraduate inductees that they should ‘explore ideas like universal basic income’, a policy Elon Musk also thinks will become increasingly ‘necessary’ over time, as robots outcompete humans across a growing range of jobs.footnote⁸ Musk has been naming his SpaceX drone vessels after spaceships from Iain M. Banks’s Culture Series, a set of ambiguously utopian science-fiction novels depicting a post-scarcity world in which human beings live fulfilling lives alongside intelligent robots, called ‘minds’, without the need for markets or states.footnote⁹

Politicians and their advisors have equally identified with the automation discourse, which has become one of the leading perspectives on our ‘digital future’. In his farewell presidential address, Obama suggested that the ‘next wave of economic dislocations’ will come not from overseas trade, but rather from ‘the relentless pace of automation that makes a lot of good, middle-class jobs obsolete.’ Robert Reich, former Labour Secretary under Bill Clinton, expressed similar fears: we will soon reach a point ‘where technology is displacing so many jobs, not just menial jobs but also professional jobs, that we’re going to have to take seriously the notion of a universal basic income.’ Clinton’s former Treasury Secretary, Lawrence Summers, made the same admission: once-‘stupid’ ideas about technological unemployment now seem increasingly smart, he said, as workers’ wages stagnate and economic inequality rises. The discourse has become the basis of a long-shot presidential campaign for 2020: Andrew Yang, Obama’s former ‘Ambassador of Global Entrepreneurship’, has penned his own tome on automation, The War on Normal People, and is now running a futuristic campaign on a ‘Humanity First’, ubi platform. Among Yang’s vocal supporters is Andy Stern, former head of the seiu, whose Raising the Floor is yet another example of the discourse.footnote¹⁰

Yang and Stern—like all of the other writers named so far—take pains to assure readers that some variant of capitalism is here to stay, even if it must jettison its labour markets; however, they admit to the influence of figures on the far left who offer a more radical version of the automation discourse. In Inventing the Future, Nick Srnicek and Alex Williams argue that the ‘most recent wave of automation is poised’ to transform the labour market ‘drastically, as it comes to encompass every aspect of the economy’.footnote¹¹ They claim that only a socialist government would actually be able to fulfil the promise of full automation by creating a post-work or post-scarcity society. In Four Futures, Peter Frase thoughtfully explores the alternative outcomes for such a post-scarcity society, depending on whether it still had private property and still suffered from resource scarcity, which could persist even if labour scarcity were overcome.footnote¹² Like the liberal proponents of the automation discourse, these left-wing writers stress that, even if the coming of advanced robotics is inevitable, ‘there is no necessary progression into a post-work world’.footnote¹³ Srnicek, Williams and Frase are all proponents of ubi, but in a left-wing variant. For them, ubi serves as a bridge to ‘fully automated luxury communism’, a term originally coined in 2014 by Aaron Bastani to name a possible goal of socialist politics, and which flourished for five years as a meme on the internet before his book—outlining an automated future in which artificial intelligence, solar power, gene-editing, asteroid mining and lab-grown meat generate a world of limitless leisure and self-invention—finally appeared.footnote¹⁴

2. labour’s global deindustrialization

Automation-discourse theorists recognize that, if technologically induced job-destruction is to have widespread social ramifications, it will have to eliminate employment in the vast and variegated service sector, which absorbs 74 per cent of workers in high-income countries and 52 per cent worldwide.footnote²⁴ They therefore focus on ‘new forms of service-sector automation’ in retail, transportation and food services, where ‘robotization’ is said to be ‘gathering steam’ with a growing army of machines that take orders, stock shelves, drive cars and flip burgers. Many more service-sector jobs, including some that require years of education and training, will supposedly be rendered obsolete in the coming years due to advances in artificial intelligence.footnote²⁵ Of course, these claims are mostly predictions about the effects that technologies will have on future patterns of employment. Such predictions can go wrong—as for example when Eatsa, an automated fast-food company which employed neither cashiers nor waiters, was forced to close most of its stores in 2017.footnote²⁶

In making their case, automation theorists often point to the manufacturing sector as the precedent for what they imagine is beginning to happen in services—for in manufacturing, the employment-apocalypse has already taken place.footnote²⁷ To evaluate the theorists’ claims, it therefore makes sense to begin by looking at what role automation has played in that sector’s fate. After all, manufacturing is the area most amenable to automation, since on the shop floor it is possible to ‘radically simplify the environment in which machines work, to enable autonomous operation’.footnote²⁸ Industrial robotics has been around for a long time: the first robot, the ‘unimate’, was installed in a General Motors plant in 1961. Still, until the 1960s, scholars studying this sector were able to dismiss Luddite fears of long-term technological unemployment out of hand. Manufacturing employment in fact grew most rapidly in those lines where technical innovation was happening at the fastest pace, because it was in those lines that prices fell the fastest, stoking the growth of demand for the products.footnote²⁹

Industrialization has long since given way to deindustrialization, and not just in any one line but across the manufacturing sectors of most countries.footnote³⁰ The share of workers employed in manufacturing fell first across the high-income world: manufacturing employed 22 per cent of all workers in the us in 1970; that share declined to just 8 per cent in 2017. Over the same period, manufacturing employment shares fell from 23 per cent to 9 per cent in France, and from 30 per cent to 8 per cent in the uk. Japan, Germany and Italy have experienced smaller but still substantial declines: in Japan from 25 per cent to 15 per cent, in Germany from 29 per cent to 17 per cent, and in Italy from 25 per cent to 15 per cent. In all cases, the declines were eventually associated with substantial falls in the total number of people employed in manufacturing. In the us, Germany, Italy and Japan, the overall number of manufacturing jobs fell by approximately a third from postwar peaks; in France, by 50 per cent and in the uk, by 67 per cent.footnote³¹

It is commonly assumed that deindustrialization must be the result of production facilities moving offshore. Yet in none of the countries named above has manufacturing job loss been associated with declines in manufacturing output. Real value added in manufacturing more than doubled in the us, France, Germany, Japan and Italy between 1970 and 2017. Even the uk, whose manufacturing sector fared worst of all among this group, saw a 25 per cent increase in manufacturing real value added over this period. To be sure, low- and middle-income countries are producing more and more goods for import into high-income countries; however, deindustrialization in the latter cannot simply be the result of productive capacity moving to the former. In the scholarly literature, deindustrialization is therefore ‘most commonly defined as a decline in the share of manufacturing in total employment’, regardless of corresponding trends in levels of manufactured output.footnote³² This definition moves in step with automation theorists’ core expectations: more goods are being produced but by fewer workers.

It is on this basis that commentators typically cite rapidly rising labour productivity, rather than an influx of low-cost imports from abroad, as the primary cause of industrial-job loss in advanced economies.footnote³³ On closer inspection, however, this explanation turns out to be inadequate: no upward leap has taken place in manufacturing productivity levels.footnote³⁴ On the contrary, manufacturing productivity has been growing at a sluggish pace for decades, leading Robert Solow to quip, ‘We see the computer age everywhere, except in the productivity statistics.’footnote³⁵ Automation theorists discuss this ‘productivity paradox’ as a problem for their account—explaining it in terms of weak demand for products, or the persistent availability of low-wage workers—but they understate its true significance. This is partly due to the appearance of steady labour-productivity growth in us manufacturing, at an average rate of around 3 per cent per year since 1950. On that basis, Brynjolfsson and McAfee suggest, automation could show up in the compounding effects of exponential growth, rather than an uptick in the growth rate.footnote³⁶

However, official us manufacturing growth-rate statistics are overinflated, for example in logging the production of computers with higher processing speeds as equivalent to the production of more computers.footnote³⁷ On that basis, government statistics claim that productivity levels in the computers and electronics sub-sector rose at an average rate of over 10 per cent per year between 1987 and 2011, even as productivity growth rates outside of that sub-sector fell to around 2 per cent per year over the same period.footnote³⁸ Since 2011, trends across the manufacturing sector have worsened: real output per hour in the sector as a whole was lower in 2017 than at its peak in 2010. Productivity growth rates in manufacturing collapsed precisely when they were supposed to be rising rapidly due to industrial automation.

Correcting manufacturing-productivity statistics in the us brings them more into line with trends visible in the statistics of other countries. In Germany and Japan, manufacturing-productivity growth rates have fallen dramatically since their postwar peaks. In Germany, for example, manufacturing productivity grew at an average annual rate of 6.3 per cent per year in the 1950s and 60s, falling to 2.4 per cent since 2000. This downward trend is to some extent an expected result of the end of an era of rapid, catch-up growth. However, it should still be surprising to the automation theorists, since Germany and Japan have raced ahead of the us in the field of industrial robotics. Indeed, the robots used in Tesla’s largely automated car factory in California were made by a German robotics company.footnote³⁹ German and Japanese firms deploy about 60 per cent more industrial robots per 10,000 manufacturing workers, compared to the us.footnote⁴⁰

Yet deindustrialization continues to take place in all these countries, despite lacklustre manufacturing-productivity growth rates: that is, it is taking place as the automation theorists expect, but not for the reasons they offer. To explore the causes of deindustrialization in more detail, I use the following accounting identity. For any given industry, the rate of growth of output (ΔO) minus the rate of growth of labour productivity (ΔP) equals the rate of growth of employment (ΔE). Thus, ΔO – ΔP = ΔE.footnote⁴¹ So, for example, if the output of automobiles grows by 3 per cent per year, and productivity in the automobile industry grows by 2 per cent per year, then employment in that industry must necessarily rise by one per cent per year (3 – 2 = 1). Contrariwise, if output grows by 3 per cent per year and productivity grows by 4 per cent per year, employment will contract by 1 per cent per year (3 – 4 = -1).

Disaggregating manufacturing-output growth rates in France provides us with a sense of the typical pattern playing out across the high-income countries (Figure 3).footnote⁴² During the so-called Golden Age of postwar capitalism, productivity growth rates in French manufacturing were much higher than they are today—5.2 per cent per year, on average, between 1950 and 1973—but output growth rates were even higher than that—5.9 per cent per year—as a result of a steady increase in employment of 0.7 per cent per year. Since 1973, both output and productivity rates have declined, but output rates fell much more sharply than productivity rates. By the early years of the 21st century, productivity growth rates—although much slower, at 2.7 per cent per year—were now faster than their corresponding output growth rates—at 0.9 per cent—as manufacturing employment contracted rapidly, by 1.7 per cent per year.

This disaggregation helps explain why automation theorists falsely perceive productivity to be growing at a rapid pace in manufacturing: in fact, productivity growth has been rapid only relative to extremely sluggish output growth. The same pattern can be seen in the statistics of other countries: no absolute decline in levels of manufacturing production has taken place, but there has been a decline in the output growth rate, with the result that output is growing more slowly than productivity (Table 1). The simultaneity of limited technological dynamism and worsening economic stagnation combines to generate a progressive decline in industrial employment levels.

As such, ‘output-led’ deindustrialization is impossible to explain in purely technological terms.footnote⁴³ In searching for alternative perspectives, economists have mostly preferred to describe it as a harmless evolutionary feature of advanced economies. However, that perspective is itself at a loss in explaining extreme variations in the gdp per capita levels at which this supposedly evolutionary economic shift has taken place. Deindustrialization unfolded first in high-income countries in the late 1960s and early 1970s, at the tail-end of a period in which levels of income per person had converged across the us, Europe and Japan. In the decades that followed, deindustrialization then spread ‘prematurely’ to middle- and low-income countries, with larger variations in incomes per capita (Figure 4).footnote⁴⁴ In the late 1970s, deindustrialization arrived in southern Europe; much of Latin America, parts of East and Southeast Asia, and southern Africa followed in the 1980s and 1990s. Peak industrialization levels in many poorer countries were so low that it may be more accurate to say that they never industrialized in the first place.footnote⁴⁵

By the end of the 20th century, it was possible to describe deindustrialization as a kind of global epidemic: worldwide manufacturing employment rose in absolute terms by 0.4 per cent per year between 1991 and 2016, but that was much slower than the overall growth of the global labour force, with the result that the manufacturing share of total employment declined by 3 percentage points over the same period.footnote⁴⁶ China is a key exception, but only a partial one (Figure 5). In the mid 1990s, Chinese state-owned enterprises shed large numbers of workers, sending manufacturing-employment shares on a steady downward trajectory.footnote⁴⁷ China re-industrialized, starting in the early 2000s, but then began to deindustrialize once again in the mid 2010s: its manufacturing-employment share has since dropped from 19.3 per cent in 2013 to 17.5 per cent in 2017, with further falls likely. If deindustrialization cannot be explained by either automation or the internal evolution of advanced economies, what could be its source?

3. blight of manufacturing overcapacity

What the economists’ accounts fail to register in explaining deindustrialization is also what is missing from the automation theorists’ accounts. The truth is that rates of output growth in manufacturing have tended to decline, not only in this or that country, but worldwide (Figure 6).footnote⁴⁸ In the 1950s and 60s, global manufacturing production expanded at an average annual rate of 7.1 per cent per year, in real terms. That rate fell progressively to 4.8 per cent in the 1970s, and to 3.0 per cent between 1980 and 2007. Since the 2008 crisis and up to 2014, manufacturing output expanded at just 1.6 per cent per year, on a world scale—that is, at less than a quarter of the pace achieved during the so-called postwar Golden Age.footnote⁴⁹ It is worth noting that these figures include the dramatic expansion of manufacturing productive capacity in China. Again, it is the incredible degree of slowdown or even stagnation in manufacturing-output growth, visible on the world scale, that explains why manufacturing-productivity growth appears to be advancing at a rapid clip, even though it is actually much slower than before. More and more is produced with fewer workers, as the automation theorists claim, but not because technological change is giving rise to high rates of productivity growth. On the contrary, productivity growth in manufacturing appears rapid today only because the yardstick of output growth, against which it is measured, is shrinking.

Seen from this perspective, the global wave of deindustrialization can be said to find its origins not in runaway technical change but rather in worsening overcapacity in world markets for manufactured goods. The rise in overcapacity developed stepwise after World War Two. In the immediate postwar period, the us hosted the most dynamic economy in the world, with the most advanced technologies.footnote⁵⁰ Under the threat of communist expansion within Europe, as well as in East and Southeast Asia, the us proved willing to share its technological largesse with its former imperial competitors Germany and Japan, as well as other ‘frontline’ countries, in order to bring them all under the us security umbrella.footnote⁵¹ In the first few decades of the post-wwii era, these technology transfers were a major boost to economic growth in Europe and Japan, opening up opportunities for export-led expansion. This strategy was also supported by the devaluation of European and Japanese currencies against the dollar.footnote⁵² However, as Robert Brenner has argued, rising manufacturing capacity across the globe quickly generated overcapacity, issuing in a ‘long downturn’ in manufacturing output growth rates.footnote⁵³

What mattered here was not only the later building out of manufacturing capacity in the global South, but the earlier creation of such capacity in countries like Germany, Italy and Japan, which hosted the first low-cost producers in the postwar era who succeeded in taking shares in global markets for industrial goods, and then invading the previously impenetrable us domestic market. That competition caused rates of industrial-output growth in the us to decline in the late 1960s, issuing in deindustrialization in employment terms. As the us responded to heightened import penetration in the 1970s by breaking up the Bretton Woods order and devaluing the dollar, these same problems spread from the highest wage countries in North America and northern Europe to Japan and the rest of Europe.footnote⁵⁴ Thereafter, as more and more countries built up manufacturing capacity, adopted export-led growth strategies and entered global markets for manufactured goods, falling rates of manufacturing-output growth and consequent labour deindustrialization also spread to Latin America, the Middle East, Asia and Africa, as well as to the global economy taken as a whole.footnote⁵⁵

Deindustrialization is not only a matter of technological advance, but also of a global redundancy of technological capacities, creating more crowded markets in which rapid rates of industrial-output expansion become more difficult to achieve.footnote⁵⁶ The mechanism transmitting this problem across the globe was severely depressed prices in global markets for manufactured goods.footnote⁵⁷ That led to falling income-per-unit capital ratios, then to falling rates of profit, then to lower rates of investment, and hence lower rates of output growth.footnote⁵⁸ In this environment, firms have faced heightened competition for market share: as overall growth rates slow, the only way to grow quickly is to steal market shares from other firms. Each firm has to do everything it can to keep up with its competitors.footnote⁵⁹ Overcapacity explains why, since the early 1970s, productivity-growth rates have fallen less severely than output-growth rates: firms have continued to raise their productivity levels as best they can despite falling rates of output growth (or else have gone under, disappearing from statistical averages). As manufacturing-output growth rates slipped below productivity-growth rates in one country after another, deindustrialization spread worldwide.

4. beyond manufacturing

The evidence I have cited so far to explain job loss in the manufacturing sector through worsening overcapacity may appear to have little purchase on the larger, economy-wide patterns—of stagnant wages, falling labour shares of income, declining labour-force participation rates and jobless recoveries after recessions—that the automation theorists have sought to explain by growing technological dynamism. Automation may therefore still seem a good explanation for the decline in demand for labour across the service sectors of each country’s economy, and so across the world economy as a whole. Yet this broader problem of declining labour demand also turns out to be better explained by the worsening industrial stagnation I have described than by widespread technological dynamism.

This is because, as rates of manufacturing-output growth stagnated in one country after another from the 1970s onward, no other sector appeared on the scene to replace industry as a major economic-growth engine. Instead, the slowdown in manufacturing-output growth rates was accompanied by a slowdown in overall growth rates. This trend is visible in the economic statistics of high-income countries. France is again a striking example (Figure 7). In France, real manufacturing value added (mva) rose at 5.9 per cent per year between 1950 and 1973, while real value added in the total economy (gdp) rose at 5.1 per cent per year.footnote⁶⁶ Since 1973, both growth measures have declined significantly: by the 2001–17 period, mva was rising at only 0.9 per cent per year, while gdp was rising at a faster but still sluggish pace of 1.2 per cent per year. Note that during the 1950s and 60s, mva growth generally led the overall economy: manufacturing served as the major engine of overall growth. Since 1973, mva growth rates have trailed overall economic growth. Similar patterns can be seen in other high-income countries (Table 2).Their export-led growth engines sputtered and slowed to a crawl; and as they did so, overall rates of economic growth slowed considerably.footnote⁶⁷

Economists studying deindustrialization often point out that while manufacturing has declined as a share of nominal gdp, it has maintained, until recently, a more or less steady share of real gdp, which is to say that, between 1973 and 2000, real mva grew at approximately the same pace as real gdp.footnote⁶⁸ What that has meant in practice is that, as manufacturing has become less dynamic, so has the overall economy. There was no significant shift in demand from industry to services. Instead, as capital accumulation slowed down in manufacturing, the expansion of aggregate output also slowed significantly across the economy as a whole.

This tendency to economy-wide stagnation, associated with the decline in manufacturing dynamism, then explains the system-wide decline in the demand for labour, and so also the problems that the automation theorists cite: stagnant real wages, falling labour shares of income and so on.footnote⁶⁹ This economy-wide pattern of declining labour demand is not the result of rising productivity-growth rates, associated with automation in the service sector. On the contrary, productivity is growing even more slowly outside of the manufacturing sector than inside of it: in France, for example, while productivity in the manufacturing sector was rising at an average annual rate of 2.7 per cent per year between 2001–17, productivity in the service sector was rising at just 0.6 per cent per year.footnote⁷⁰ Similar gaps exist in other countries. Once again, the mistake of the automation theorists is to focus on rising productivity growth rather than falling output growth. The environment of slower economic growth explains the low demand for labour all by itself. Workers, and especially workers who are not protected by powerful unions or labour laws, find it difficult to pressure employers to raise their wages when there is so much slack in the labour market.

These trends are as visible in the world economy—including China—as they are in the high-income countries (Figure 8). In the 1950s and 60s, global mva growth and gdp growth were expanding at rapid clips of 7.1 per cent and 5.0 per cent respectively, with mva growth leading gdp growth by a significant margin. From the 1970s onward, as global mva growth slowed, so did global gdp growth. In most of the decades that followed, global mva growth continued to lead gdp growth but by a much smaller margin. Since 2008, both rates have been growing at the exceptionally slow pace of 1.6 per cent per year. Again, the implication is that, as manufacturing growth rates declined, nothing emerged to replace industry as a growth engine. Not all regions of the world economy are experiencing this slowdown in the same way or to the same extent, but even countries like China that have grown quickly have to contend with this global slowdown and its consequences. Since the 2008 crisis, China’s economic growth rate has slowed considerably; its economy is deindustrializing.

The clear conclusion is that manufacturing turned out to be a unique engine of overall economic growth.footnote⁷¹ Industrial production tends to be amenable to incremental increases in productivity, achieved via technologies that can be repurposed across numerous lines. Industry also benefits from static and dynamic economies of scale. Meanwhile, there is no necessary boundary to industrial expansion: industry consists of all economic activities that are capable of being rendered via an industrial process. The reallocation of workers from low-productivity jobs in agriculture, domestic industry and domestic services to high-productivity jobs in factories raises levels of income per worker and hence overall economic growth rates. The countries that have caught up with the West in terms of income—such as Japan, South Korea and Taiwan—mostly did so by industrializing: they exploited opportunities to produce for the world market, at increasing scale and using advanced technologies, allowing them to grow at speeds that would have been unachievable had they depended on domestic-market demand alone.footnote⁷²

When the growth engine of industrialization sputters—due to the replication of technical capacities, international redundancy and fierce competition for markets—there has been no replacement for it as a source of rapid growth. Instead of workers reallocating from low-productivity jobs to high-productivity ones, the reverse of this process takes place, as workers pool increasingly in low-productivity jobs in the service sector. As countries have deindustrialized, they have also seen a massive build-up of financialized capital, chasing returns to the ownership of relatively liquid assets, rather than investment in new fixed capital.footnote⁷³ In spite of the high degree of overcapacity in industry, there is nowhere more profitable in the real economy for capital to invest itself. Indeed, if there had been, we would have evidence of it in higher rates of investment and hence higher gdp growth rates. This helps explain why firms have reacted to over-accumulation by trying to make their existing manufacturing capacity more flexible and efficient, rather than ceding territory to lower-cost, higher-productivity firms from other countries.footnote⁷⁴

The lack of an alternative growth engine also explains why governments in poorer countries have encouraged domestic producers to try to break into already oversupplied international markets for manufactures.footnote⁷⁵ Nothing has replaced those markets as a major source of globally accessible demand. Overcapacity exists in agriculture, too, and is even worse there than in industry; meanwhile services, which are mostly non-tradable, make up only a tiny share of global exports.footnote⁷⁶ If countries are to retain any dependable link to the international market under these conditions, they must find some way to insert themselves into industrial lines, however oversupplied. System-wide overcapacity and the generalized slowdown in economic growth have therefore been devastating for most poorer countries: the amount of foreign exchange they have captured through liberalization has been pitiful; so, too, has been the number of jobs created.footnote⁷⁷

Indeed, global economic downshifts have been particularly devastating for low- and middle-income countries, not only because they are poorer, but also because those downshifts have taken place in an era of rapid labour-force expansion: between 1980 and the present, the world’s waged workforce grew by about 75 per cent, adding more than 1.5 billion people to the world’s labour markets.footnote⁷⁸ These labour market entrants, living mostly in poorer countries, had the misfortune of growing up and looking for work at a time when global industrial overcapacity began to shape patterns of economic growth in post-colonial countries: declining rates of manufactured export growth into the us and Europe in the late 1970s and early 1980s ignited the 1982 debt crisis, followed by imf-led structural adjustment, which pushed countries to deepen their imbrications in global markets at a time of ever slower global growth and rising competition from China. In spite of shocks to the demand for labour generated by slowing global growth rates and rising economic turmoil, huge numbers of workers were still forced to seek employment in order to live.footnote⁷⁹

Some may respond that the present low rates of global growth are in fact nothing out of the ordinary, if only we shift our baseline from the exceptional postwar ‘Golden Age’ to previous periods, such as the pre-wwi era. But a global perspective on the decline in the demand for labour provides the answer to this objection. It is true that, during the Belle Epoque, average rates of economic growth were more comparable to growth rates today.footnote⁸⁰ However, in that period, large sections of the population still lived in the countryside and produced much of what they needed to live.footnote⁸¹ European empires still overran the globe, not only limiting the diffusion of new manufacturing technologies to a few regions, but also actively deindustrializing the rest of the world economy.footnote⁸² Yet in spite of the much more limited sphere in which labour markets were active—and in which industrialization took place—the pre-wwi era, as also the inter-war period, was marked by a persistently low demand for labour, making for employment insecurity, rising inequality and tumultuous social movements aimed at transforming economic relations.footnote⁸³ In this respect, the world of today does look like the world of the Belle Epoque.footnote⁸⁴ The difference is that today, a much larger share of the world’s population depends on finding work in labour markets in order to live.

What automation theorists describe as the result of rising technological dynamism is actually the consequence of worsening economic stagnation: productivity-growth rates appear to rise when, in reality, output-growth rates are falling. This mistake is not without reason. The demand for labour is determined by the gap between productivity and output growth rates. Reading the shrinking of this gap the wrong way around—that is, as due to rising productivity rather than falling output rates—is what generates the upside-down world of the automation discourse. Proponents of this discourse then search for the technological evidence that supports their view of the causes for the declining demand for labour. In making this leap, the automation theorists miss the true story of overcrowded markets and economic slowdown that actually explains the decline in labour demand.

Yet even if automation is not itself the primary cause of a low demand for labour, it is nevertheless the case that, in a slow-growing world economy, technological changes within a near-future horizon may still threaten large numbers of jobs with destruction, in a context of economic stagnation and slower rates of job creation. Technological change then acts as a secondary cause of a low labour demand, operating within the context of the first. The concluding section of this essay in nlr 120 will address these technological dynamics, as well as the socio-political problems—and opportunities—generated by a persistently low demand for labour in late-capitalist societies.